LSE-Refinitiv deal faces lengthy antitrust assessment: sources

LONDON (Reuters) – U.S. buyout fund Blackstone Group Inc is anticipated to announce the merger of its majority-owned monetary information agency Refinitiv with the London Inventory Trade Group Plc inside every week, however the deal is anticipated to face a protracted antitrust assessment earlier than it will possibly shut, 4 sources informed Reuters.

FILE PHOTO: The London Inventory Trade Group workplaces are seen within the Metropolis of London, Britain, December 29, 2017. REUTERS/Toby Melville/File Picture

Negotiations on the $27 billion deal are at a sophisticated stage, with Blackstone, the LSE and Thomson Reuters Corp in broad settlement on the primary facets of the deal, the sources mentioned, talking on situation of anonymity.

A proper announcement might come on Aug. 1 when the LSE publishes half-year outcomes, two of the sources mentioned.

Thomson Reuters spokesman David Crundwell declined to remark. Representatives at Refinitiv, Blackstone and the LSE additionally declined to remark.

A merger would considerably develop the LSE’s data companies enterprise, which the bourse operator has been constructing as a extra secure supply of money circulation than its buying and selling and clearing companies, placing strain on rivals together with Intercontinental Trade Inc and Deutsche Boerse AG.

A deal might nevertheless face some dangers.

Antitrust regulators in Europe and america are anticipated to start out an in-depth assessment which can last as long as 18 months, the sources mentioned.

Within the European Union, the deal is anticipated to enter a Section II investigation, two sources mentioned, a extra onerous assessment used solely in offers the place there are issues it can have a significant impression on competitors.

The EU is anticipated to scrutinize if the deal will have an effect on the worth of economic information, one supply mentioned.

Investor teams in Europe have been lobbying for inventory exchanges to chop the worth of inventory transactions information so “consolidated” feed of costs from completely different platforms will be created at an affordable price.

SHARE LOCK-UPS

Blackstone and different Refinitiv buyers may even face a number of share lock-up intervals, with the primary anticipated to final by means of 2022, relying on the size of the antitrust assessment.

Three sources acquainted with the matter informed Reuters that the non-public fairness fund intends to press forward with the deal having fastidiously weighed regulatory hurdles and the danger that LSE shares might fall sharply if Britain leaves the EU with out a deal in October.

They mentioned the deal has strategic deserves and wouldn’t be a “fast flip” because the U.S. fund will hold investing within the mixed entity for no less than one other three to 4 years.

“This is sort of a reverse buy-and-build technique,” one supply mentioned, including a merger with the LSE had been contemplated for the reason that Refinitiv deal closed in October.

If profitable, Blackstone may have roughly doubled the worth of its unique funding in Refinitiv in 9 months.

It’ll then have the ability to steadily cut back its LSE publicity by promoting shares as lock-up intervals expire, the sources mentioned.

One supply mentioned the deal has been mentioned by the Thomson Reuters board, which was in favour of the transaction.

The corporate mentioned on July 26 30-year settlement for Refinitiv to license content material from Reuters Information, signed when Blackstone invested, would stay in place underneath the phrases of the brand new deal.

BOARD SEATS

The LSE has mentioned it could pay for the take care of newly issued shares, turning Refinitiv’s current buyers into LSE shareholders who would personal about 37% of the mixed firm.

Blackstone purchased a majority stake in Refinitiv from Thomson Reuters final yr in a deal valuing the corporate at $20 billion, together with debt.

Blackstone agreed final yr to grant Thomson Reuters warrants that might enhance its 45% stake in Refinitiv to 47.6% if some efficiency metrics have been met, three of the sources mentioned.

These milestones have now been achieved by Refinitiv, in keeping with the sources. This implies Thomson Reuters will safe a 15% LSE stake, whereas Blackstone and different minority buyers, together with Canada Pension Plan Funding Board and Singapore state fund GIC – which helped finance the Refinitiv buyout – will management 22%.

Refinitiv administration may even get some LSE shares, the sources mentioned.

Blackstone and Thomson Reuters are anticipated to have seats on the LSE board as a part of a deal, although their mixed voting rights will probably be capped at 30%.

Blackstone may have two board seats whereas Thomson Reuters may have one, the sources mentioned.

An commercial for Refinitiv is seen on a display screen in London’s Canary Wharf monetary centre, London, Britain, October 2, 2018. REUTERS/Russell Boyce

Refinitiv boss David Craig will proceed main the monetary information agency as an unbiased model inside LSE, the sources mentioned.

Goldman Sachs Group Inc, Morgan Stanley and Robey Warshaw are working with the LSE, the sources mentioned.

Blackstone has employed Evercore Inc and Canson Capital Companions to barter on its behalf, whereas Thomson Reuters is represented by Guggenheim Securities, they added.

Reporting by Pamela Barbaglia; Further reporting by Huw Jones; Modifying by Rachel Armstrong and David Holmes